Activity Examined
Asked about whether Finra was looking into the smaller trades, spokesman George Smaragdis said in an e-mail that the independent monitor of the securities business was “aware of the situation and is examining trading activity” in the bonds.
“These are intended for institutional purchasers, or at least for people that can afford the risk by making it a minimum denomination of $100,000,” said Haines, who teaches municipal finance at the Maurer School of Law at Indiana University in Bloomington.The rule Haines referenced states that brokers and dealers can’t execute a trade of a municipal security that’s below the minimum denomination of the issue, according to the MSRB’s website.
Minimum Denomination
The Securities Industry and Financial Market Association, a New York-based trade group that represents banks and investors, released a notice today warning firms about trading the Puerto Rico bonds in sizes below $100,000.“We urge firms to take care in cases where customers may request to split trades among accounts in ways that would result in trade sizes smaller than the minimum denomination,” according to the notice.The bonds declined today. Their average yield was about 8.73 percent, the highest since they were free to trade. The price touched 92 cents, the cheapest yet.
Barbara Morgan, David Millar and Betsy Nazario, spokesmen for the Government Development Bank, which handles the island’s debt sales, didn’t immediately respond to an e-mail seeking comment.The Bond Buyer reported March 19 that smaller-denomination sales were being made in violation of the requirement.By Michelle Kaske March 21, 2014
To contact the reporter on this story: Michelle Kaske in New York at [email protected]
To contact the editors responsible for this story: Stephen Merelman at [email protected] Mark Tannenbaum, Alan Goldstein